Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Pretium Resources Inc (NYSE:PVG).
Pretium Resources Inc (NYSE:PVG) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that PVG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as McGrath RentCorp (NASDAQ:MGRC), KAR Auction Services Inc (NYSE:KAR), and Gevo, Inc. (NASDAQ:GEVO) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to go over the latest hedge fund action surrounding Pretium Resources Inc (NYSE:PVG).
Do Hedge Funds Think PVG Is A Good Stock To Buy Now?
At the end of March, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PVG over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Pretium Resources Inc (NYSE:PVG) was held by Sprott Asset Management, which reported holding $45.2 million worth of stock at the end of December. It was followed by Sun Valley Gold with a $31.1 million position. Other investors bullish on the company included Paulson & Co, Bridger Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Sun Valley Gold allocated the biggest weight to Pretium Resources Inc (NYSE:PVG), around 11.06% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 2.71 percent of its 13F equity portfolio to PVG.
Since Pretium Resources Inc (NYSE:PVG) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of hedgies who were dropping their entire stakes in the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of all the hedgies monitored by Insider Monkey, worth about $27.3 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also said goodbye to its stock, about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Pretium Resources Inc (NYSE:PVG). These stocks are McGrath RentCorp (NASDAQ:MGRC), KAR Auction Services Inc (NYSE:KAR), Gevo, Inc. (NASDAQ:GEVO), The Buckle, Inc. (NYSE:BKE), Perficient, Inc. (NASDAQ:PRFT), Knowles Corp (NYSE:KN), and Equinox Gold Corp. (NYSE:EQX). This group of stocks’ market valuations match PVG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $155 million in PVG’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand Gevo, Inc. (NASDAQ:GEVO) is the least popular one with only 6 bullish hedge fund positions. Pretium Resources Inc (NYSE:PVG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PVG is 81.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately PVG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PVG were disappointed as the stock returned -11.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.